On Monday, U.S. regulators sued Adobe Inc., saying that the software company and two executives “lied to consumers” by hiding the cancellation fee for a popular subscription plan and making it too hard for customers to cancel their subscriptions.
An announcement from the FTC said that the claims were made in a federal court complaint that was sent by the Federal Trade Commission and then filed by the Justice Department. Adobe said Monday in a statement that it would defend itself in court.
Adobe ADBE, +0.68% stock prices went down 1.3% at the end of Monday’s regular trading session.
The complaint says that Adobe, which makes design tools like Photoshop and InDesign, tricked people online into buying its “annual paid monthly” plan by making it the default choice.
The FTC also says that Adobe “buries” information about its early termination fee for that plan in small print or under icons that users have to move their mouse over to see. The agency said Adobe has used that fee, which is equal to half of the remaining monthly payments if the user cancels within the first year, to “ambush consumers to discourage them from canceling their subscriptions.”
The FTC said, “When customers have tried to cancel their subscription on the company’s website, they have had to navigate several pages in order to cancel.”
“When customers call Adobe’s customer service to cancel, they are met with resistance and delays from Adobe representatives,” the news source said. “Consumers also face other problems, like calls and chats getting dropped and being transferred more than once.” People who thought they had successfully canceled their subscription said that the company kept charging them until they saw the charges on their credit card statements.
The lawsuit against Adobe wants the company to pay civil penalties and give “unspecified amounts of consumer redress.” The Justice Department also wants a permanent court order that the company can’t break the law again.
An Adobe vice president named Maninder Sawhney and the president of Adobe’s Digital Media business named David Wadhwani are named in the lawsuit. The case was brought to the attention of the Northern District of California U.S. District Court.
Adobe has sold its software through subscriptions for more than ten years; the FTC said that these subscriptions make up most of its sales. Analysts have been worried lately, though, because the company is facing tougher competition.
Adobe said in a statement that the claims in the complaint were not true.
Adobe’s general counsel and chief trust officer, Dana Rao, said, “We are clear about the terms and conditions of our subscription agreements and have an easy way to cancel.” “We will show the FTC’s claims to be false in court.”
This is the latest step taken by regulators under the Biden administration to try to stop mergers and other business practices that they say hurt consumers, many of whom are already struggling with inflation.
Adobe stock has dropped 13% so far this year. But after the company reported its quarterly results last week, shares went up. This was due in part to a more positive outlook for its Creative Cloud subscription services, which include apps like Photoshop and Illustrator.
